Weak pound, global growth drive manufacturing rebound

Manufacturers in the UK are celebrating a surge in growth as the strong global economy combined with the weak pound pushes up demand for British goods.

Industrial production – which includes manufactured goods as well as output from mines and energy firms – is thought to have risen by 0.4pc in November, returning to growth after a flat October.

Official figures on Wednesday are expected to signal the return of a sustained expansion for British industry.

“The world economy is buoyant, the eurozone is buoyant, the pound is very competitive,” said Martin Beck at Oxford Economics. “This is perfect if you are an exporter, it is a sweet spot.”

He believes this trend should be sustainable: “The ingredients will remain there for good performance.”

Strong surveys indicate companies are preparing for longer-term growth too.

“Encouragingly, the recent strength has been driven by the production of investment and intermediate goods, suggesting that firms are looking to invest and expand their capacity, despite Brexit uncertainty,” said Ruth Gregory at Capital Economics, predicting an above-average 0.5pc rise in industrial production for the month.

Combined with other data including reasonably robust retail sales, “all in all, the economy seems to have maintained a decent pace in the fourth quarter”, she said. “This provides some support to our view that GDP will grow by 2pc or so in 2018, rather than slow to 1.4pc as the consensus expects.”

November’s weather was colder than usual, pushing up energy consumption and so boosting the industrial numbers further.

A survey from manufacturing industry group EEF found factories expect the resurgence to continue into 2018, making it a vintage year for growth.

Firms are more optimistic about growth than at any point since 2014, with 40pc of manufacturers planning to expand while just 19pc expect conditions to deteriorate.

Sales are expected to grow in the domestic market according to 62pc of firms, while 47pc anticipate EU demand to rise and 51pc are looking for growth from elsewhere in the world.

Risks to the outlook include cyber attacks, increased US protectionism, an economic slump in China, and any failure to agree on a Brexit transition deal.

Stephen Phipson, the EEF’s chief executive, said: “Manufacturers left 2017 in an upbeat mood and are set to outpace the rest of the economy again this year as the growth in global trade continues to gain momentum.

“That is not to say everything in the 2018 garden is rosy, however, as there are plenty of factors that could puncture this positive picture.”